Many people think that markets can’t provide culture. History, for example, has to be supported through government-funded schools, endowments, and grants. In this view, markets can only destroy history: shopping-mall developers want to build on historic battlefields; priceless historic items wind up on eBay selling to collectors with piles of money but too little taste and knowledge to “truly” appreciate them; and ignorant authors of historical romances make millions by selling Americans sanitized and saccharine fluff instead of the stories of oppressed peoples that are “real” history.

Governments need to protect our history (and us), we’re told, by funding historians, stopping malls, and providing standards for the teaching of history in schools. It turns out, however, that markets do exist for history, often in surprising places, and that entrepreneurs have found ways to “sell” history quite effectively.

My family recently visited American Girl Place in Chicago. The Pleasant Company, which operates this store together with its extensive catalog and website operation, has created a profitable niche selling history to tens of thousands of young girls. True, the history is dressed up in cute outfits and accessories, but it is real history. The company’s message to parents makes it clear that selling history is critical to its product line: “American Girl’s creator, Pleasant T. Rowland, believed that engaging stories about girls living at important times in the past–and dolls standing as tangible symbols of these characters–could breathe life into history, turning it into something real and personal, something today’s girls could hold in their hands.”

How does the company do it? Three things are critical.

First, the company has designed products that attract and hold the attention of its target audience, preteen girls, while simultaneously appealing to the family members who make the buying decisions. For the children, the dolls are attractive, fun to play with, and capable of acquiring an astounding amount of period clothing and other accessories. For the parents and grandparents who pay the bills, the dolls combine a well-made product with the bonus of an “educational” toy that will encourage children to learn about history and to read the accompanying books. As the company’s website sums it up: “At American Girl, we’re committed to helping you protect your daughter’s individuality, intellectual curiosity, and imagination. We offer age-appropriate books and playthings for every stage of her life–keepsakes we hope she’ll one day want to share with a daughter of her own.”

Second, the company has paid attention to its market and designed a set of products for it. There is Felicity, a child of colonial America just before the Revolution; an African-American, Addie, who has a heartwarming story of escape on the Underground Railroad; a Hispanic, Josefina, from New Mexico in 1824, when it was still serious about its Hispanic culture as something more than a theme park; an American Indian, Kaya, with a strong story of Nez Perce culture from 1764; Kirsten, a Swedish immigrant from 1854; Samantha, a wealthy child from 1904; Kit, a child of the Depression in the Midwest; and Molly, a child during World War II. In contrast to the assumptions of those who call for government-mandated diversity, the Pleasant Company has shown that markets respond to diverse customer populations. I am sure that future dolls will feature immigrants from other cultures as well. (In other product lines the company also offers diverse products: its modern dolls come in multiple skin tones to allow customers to get a doll that matches their child’s color.) As it turns out, children don’t just want the doll that matches their own ethnicity–they want them all. My younger daughter’s bedroom is now a multicultural mélange mirroring our society.

Third, the company has a successful product. My daughters’ school “social studies” books drain the life from American history. The Revolutionary War and Civil War become the opportunity for dry recountings of dates and names, mixed in with “inspiring” vignettes of diverse ethnic groups. These vignettes are, to be blunt, dull as dishwater because committees determined to offend no one wrote them. The American Girl books, on the other hand, are lively and engaging. Because they’re fun to read, they get read–over and over and over. My daughters have undoubtedly absorbed more American history from the American Girl books–including more of the social history of “underrepresented” peoples that school text-selection committees seem to value so highly–than from their textbooks and social-studies classes combined.

Knowing the Market

Are there downsides to these wonderful products? Of course. The books aren’t always as complete as I’d like; the explanation of the Great Depression’s causes doesn’t satisfy me as an economist, for example, and I’d like a lot more detail on the lack of freedom in Sweden that drove Kirsten’s family to the United States. The books don’t have a consistent classical-liberal analysis of events. Indeed, they don’t really analyze many important events at all. But if the books did satisfy me on these points, they’d bore my daughters to tears. I might know more economics than the Pleasant Company and its authors, but they know a great deal more about what kids will and won’t read. A few eight-year-olds may want to read serious economics and political theory, but most won’t. On the whole, I think the Pleasant Company and its authors have struck about the right balance between entertainment and history in the books and the “back stories” for the dolls.

One other aspect of the product line deserves mention. In addition to buying the dolls and their many accessories through catalogs and websites (www.americangirlstore. com), you can visit the store. In addition to all the products, the store offers a musical production, lunch, tea, and dinner, a doll hospital, doll hair salon, and photo studio. On our visit my younger daughter got her picture taken with two of her dolls, had lunch with the dolls, and attended the musical. The lunch is designed to be elegant (keeping in mind that it is for children). The food was surprisingly good, cleverly presented, and cheerfully served. The dolls ate along with us in special chairs and with miniature plates and cups. The musical involved a club of girls and their dolls, learning to get along with one another after a dispute over who was whose best friend. The store was packed with girls and their dolls. (The only boys in sight were sitting in chairs waiting for their sisters to hurry up and get done.) Many girls were there with their grandmothers, others with mothers or other relatives.

The most impressive aspect of the store was the calmness of the hundreds of children 8 to 12 years old, each clutching her doll and many dressed in outfits that matched the dolls’ clothes. Having led two Girl Scout troops, I can attest that this was not due to the innate good behavior of young girls. The good behavior and good manners on display were clearly the result of the store’s product, an elegant experience with one’s doll, family, and friends. Think of it: a merchant found a way to get young children to behave by offering them that experience and charging them for it. We often hear people decry the terrible effects of commerce on culture and civility. Our visit to American Girl Place suggested that it is possible for commerce to have the opposite effect.

An American Girl Success

There are four important lessons from the success of the American Girl dolls. First, history can be sold–even to children. This shouldn’t be a surprise given that popular history and historical fiction are best-sellers for adults and children alike. But given the regular rending of garments and gnashing of teeth over the alleged dumbing down of our culture, this is surely encouraging. Of course, not all girls play with American Girl dolls or read their books. But enough do that the series is a huge success and continues to expand. How big a success? The founder of the company sold it to Mattel in 1998 for $700 million, and the company has sold over 80 million books and seven million dolls.

Second, the profit motive is enough to produce a product line that truly values the experience of multiple cultures. The American Girl series includes a representative sample of the different peoples who populated this country. The representations are respectful of cultural differences, emphasize strong role models from each, and are, as far as I can tell, reasonably accurate in their portrayals. One aspect of the dolls might not please diversity advocates, however: All are American girls first, rather than hyphenated Americans. This is a melting-pot vision of America, not one built on never-ending division along ethnic lines.

Third, history can be fun, and markets make it so. It is far too easy as an adult to forget what made us interested in history when we were young. History is interesting when it is fun and fun because it is interesting. The American Girl dolls make playing and reading about history fun. That’s much more likely to create future historians than the dead text of social-studies books written by committees. Talking about what my daughters have read in their American Girl books has provoked substantive conversations that have opened up new avenues for my children and led them to want to read more about specific topics. Unlike government schools, which can force children to read boring books, the Pleasant Company can succeed only if it can convince children to ask for its products and parents to buy them. Market pressures produce better products.

Finally, the dolls are the result of a classic entrepreneur’s vision. Pleasant Rowland, a former teacher and textbook writer with no formal business training, once visited Williamsburg, Virginia. As she told Fortune Small Business in an interview in the fall of 2002, “Off I went, thinking I was going to have a nice little vacation. Instead it turned into one of the seminal experiences of my life. I loved sitting in the pew where George Washington went to church and standing where Patrick Henry orated. I loved the costumes, the homes, the accessories of everyday life–all of it completely engaged me. I remember sitting on a bench in the shade, reflecting on what a poor job schools do of teaching history, and how sad it was that more kids couldn’t visit this fabulous classroom of living history. Was there some way I could bring history alive for them, the way Williamsburg had for me?”*

Rowland, then 45 years old, took her savings and created the business from scratch in little more than a year. She built the Pleasant Company into a $300 million-per-year business in 12 years. With any luck, girls who graduate from the dolls to business school will one day be studying Rowland’s story as a case study of entrepreneurial talent.

What’s the moral? Markets aren’t supposed to sell history, or if they do, it is almost always claimed to be inaccurate or dumbed down to the lowest common denominator. The success of the American Girl dolls suggests otherwise: good history sells, and entrepreneurs will find ways to sell it. The result benefits us all. Pleasant Rowland got rich on selling children a history of America that is multiethnic, emphasizes the contributions of strong women, and is accurate. Countless children got wonderful toys. Parents and grandparents got to watch their children and grandchildren grow up with a love of history. If markets can do that, what can’t they do?

Andrew P. Morriss is the D. Paul Jones, Jr. & Charlene A. Jones Chairholder in Law and Professor of Business at the University of Alabama. He is coeditor (with Roger E. Meiners and Pierre Desrochers) of Silent Spring at 50: The False Crises of Rachel Carson, forthcoming from the Cato Institute.